EU Morning Report

Euro falls on heightened risk aversion

  • The euro edged higher against the dollar on Wednesday supported by ECB officials' hawkish comments. The ECB expressed concerns about inflation fuelling speculation of an increase in the interest rates before the Fed. The euro rose as high as 1.3785 dollars on Wednesday from 1.3653. Today, the euro plummeted surrendering earlier gains as tensions in Libya continues and the violence in the region pushed oil prices higher and world equities lower. Risk aversion in the currency markets is heightened weighing on the single currency and pushing it as low as 1.3703 dollars. 
  • The US dollar edged lower against the safe haven Swiss franc as tensions in the Middle East resume. The pair fell to a record low today hitting 0.9273 from 0.9391 traded yesterday. Against the Japanese Yen, the dollar slid hitting a two and a half week low at 81.82 from 83.96. Focus turns to the US Jobless Claims, Durable Goods Orders and New Home Sales released later today.
  • The Sterling rallied on Wednesday after the Bank of England MPC minutes revealed that a third member, Spencer Dale, joined the hawkish side voting for a rate hike. Andrew Stentance and Martin Wheale voted for an interest rate increase while Adam Posen favored extending the size of the asset-purchasing program. After the minutes, the British pound jumped as high as 1.6273 versus the dollar as expectations for an early rate hike are heightened. Today, the sterling declined weighted by a high risk aversion in the market which pushed the pound as low as 1.6141 dollars.
  • The Australian dollar rose on Thursday after data showed strong business investment outlook. As economic growth appears strong, investors are expecting an increase in interest rates in the following months. Against the greenback, the Aussie edged as high as 1.0082 from 0.9980. Today, the Aussie tumbled as investors favor safe haven assets pushing the Aussie below parity down to 0.9999 dollars.
  • Oil ticked higher today as investors fear the Libya unrest can spread to other oil producing countries which, in turn, can hurt oil supplies. Oil rose as high as 103.39 dollars a barrel from 98.48.

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3690 with a preference to enter into Long positions at 1.3700
  • § The USDJPY pivot point is at 82.50 with a preference to enter Short positions at 82.45             

Today's calendar and market movers:

  • § US Durable Goods Orders in January is forecasted to gain 2.9%
  • § US Initial Jobless Claims is forecasted to fall top 405K
  • § US New Home Sales in January is forecasted to rise to 330K

Equity Markets:

US equities were negative on Wednesday with the S&P500 trading down -0.61% and the DJIA trading down -0.88%. The European bourses are also negative with the FTSE trading down -1.22%, the DAX down -1.69% and the CAC down -0.92%. The NIKKEI and the HSI at the time of writing are trading down -1.19% and down -0.07% respectively.

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